Are our markets fair?
“Spirit of ‘76” by A.M. Willard. Source: Wikipedia
There has been a good amount of discussion about the structure of the stock market. Some have looked at how stock market trades are executed and concluded that our markets are rigged—that powerful insiders use special access to inside information to game the system and profit at the expense of average investors.
It’s true that the stock exchanges are a lot different now than they were 20 years ago, largely in reaction to new technology and new SEC regulations. And some market-makers do try to “scalp” a penny or two off of big trades—buying 1,000 shares of IBM at 165, selling them at 165.01. Do this enough times and you can make some real money.
But there’s good evidence that investing in the market has gotten cheaper. It stands to reason that when market makers compete, consumers benefit. Investment giant Vanguard studied their transaction costs and found that they have declined 60 percent over the past 15 years.
For all their flaws, US markets remain the most open, transparent, and efficient in the world. Our commitment to free markets and free information sets a high standard. The more we can do to get more market information to more people, the better everyone will be. July 4th is about freedom and fairness. Our markets should try to be both.
Douglas Tengdin, CFA
Charter Trust Company